What is Importation?

1. What is Importation?

2. Importation Defined • It is the commercial activity of buying and bringing in goods from a foreign country. • Commodities (goods or services) bought from a foreign country.

3. Why import?

4. Reasons for Importing • Companies import goods and services to supply to the domestic market at a cheaper price and (or) better quality that competing goods manufactured in the domestic market • Companies import products that are not available in the local market

5. Types of Importers Looking for any product around the world to import and use; or import and sell. Looking for foreign sourcing to get their products at the cheapest price.

6. Types of Importers • Using foreign sourcing as part of their global supply chain. • Importers by circumstances: - Recipient of gifts, promo items, etc. (OFW relatives) - Excess baggage, items left abroad, etc.

7. Global Trade Statistics (Import & Export)

8. List of Countries By Imports Source: World Trade Organization

9. List of Countries By Imports Source: World Trade Organization

10. List of Countries By Exports Source: World Trade Organization

11. List of Countries By Exports Source: World Trade Organization

12. List of Countries By Exports Source: World Trade Organization

13. Import Classification (Degree of Restriction) • Freely-Importable Commodities Importation of these commodities may be effected without the prior approval or clearance from any government agency.

14. Import Classification (Degree of Restriction) • Regulated Commodities Importation of these commodities requires import clearance or permit from regulatory or appropriate government agencies.

15. Import Classification (Degree of Restriction) • Prohibited Commodities Importation of these commodities is not allowed or banned under Philippine laws.

16. Imports Classification (Degree of Restriction) • Prohibited Commodities Sec. 101 of the Tariff and Customs Code: • Absolutely Prohibited Importations • Conditionally Prohibited Importations

17. Philippine Law on Importation • When importation begin? – the carrying vessel or aircraft entersPhilippine jurisdiction with intention to unlade therein. • Philippine jurisdiction is defined in Article 1 of the 1987 Philippine Constitution • Intention to unlade – as evidenced by the inward cargo manifest

18. The National Territory The national territory comprises the Philippine archipelago, with all the islands and waters embraced therein, and all other territories over which the Philippines has sovereignty or jurisdiction, consisting of its terrestrial, fluvial and aerial domains, including its territorial sea, the seabed, the subsoil, the insular shelves, and other submarine areas. The waters around, between, and connecting the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines .

19. Philippine Law on Importation Duty of vessel or aircraft to make entry Except those specifically allowed by law, vessel or aircraft engaged in foreign trade shall touch at port of entry only ...when arriving within a customs collection district…from a foreign port shall make entry at the port of entry of such district…shall be subject to the jurisdiction of the Collector…while within his jurisdiction.

20. Principal Port of Entry • Port of San Fernando • Port of Clark • Port of Subic • Port Manila • Port of MICP • Port of NAIA • Port of Batangas • Port of Legaspi • Port of Tacloban • Port of Iloilo • Port of Cebu • Port of Surigao • Port of Cagayan de Oro • Port of Zamboanga • Port of Davao

21. Philippine Law on Importation Importation through customhouse only All importation, whether subject to duty or not shall be entered through a customhouse at port of entry.

22. Philippine Law on Importation • When importation end? – duties and taxes paid, or secured to be paid, legal permit for withdrawal have been granted, and the goods legally left customs jurisdiction.

23. Philippine Law on Importation WHEN TO FILE AN ENTRY? Entry must be filed in the Customhouse within 30 days from the date of discharge of the last package from the vessel, which shall not be extendible. Failure to file the entry constitutes implied abandonment and will result in the ‘ipso facto’ forfeiture of the goods/shipment.

24. Philippine Law on Importation • Kinds of Abandonment of Imported Articles • Express Abandonment • – the owner, importer or consignee signifies to the Collector his intention to abandon his importation in favor of the government, in writing and under oath.

25. Philippine Law on Importation • Kinds of Abandonment of Imported Articles • 2. Implied Abandonment – • Failure to file an entry for his importation within the non-extendible period of thirty (30) days from the date of discharge of the last package from vessel or aircraft. • Having filed an entry, failed to claim his importation within 15 days non-extendible from the date of posting of the notice to claim such importation

26. Import Taxation GENERAL RULE OF IMPORTATION ALL IMPORTATIONS are subject to payment of • DUTY and • TAX (VAT & Excise Taxes, if any) . . . upon each importation . . . even though previously exported from the Philippines.

27. Import Taxation EXCEPTION TO THE RULE If provided by law or international agreements: • Conditionally-free importation (Sec. 105, TCCP) • Importation of CBWs (Sec. 2001-2002, TCCP) • Freeport importations (Subic, Clark, Bataan, etc.)

28. Import Taxation EXCEPTION TO THE RULE If provided by law or international agreements: • Ecozone importations (PEZA, SEZ) • De minimis importations (Sec. 709, TCCP) • VAT Exempt under NIRC • As specifically exempted under new regulations (R.A., international agreements)

29. Import Taxation IMPORTER’S LIABILITY Unless relieved by laws and regulations, the liability for duties, taxes, fees and other charges attaching on importation constitute a personal debt from the importer which shall be discharged only upon full payment of all duties, taxes, fees and other charges legally accruing.

30. Import Taxation Government’s Lien on Imported Goods It also constitute a lien upon the articles imported which may be enforced while such articles are in custody or subject to the control of the government.

31. Import Taxation Who is the IMPORTER? All articles imported into the Philippines shall be held to be the property of the person to whom the same are consigned and the holder of the bill of lading duly indorsed by the consignee therein named or, if consigned to order, by the consignor, shall be deemed the consignee thereof.

32. PH Customs Clearance Process

33. PH Customs Clearance Process Tax and duty-free importation The Department of Finance is the sole approving agency for all Tax Exemption Certificate (TEC); endorsement from originating/recommending agency triggers the process. e.g. – importation of foreign embassies, endorsement first by the Department of Foreign Affairs

34. PH Customs Clearance Process The National Single Window The Department of Finance is the sole approving agency for all Tax Exemption Certificate (TEC); endorsement from originating/recommending agency triggers the process. e.g. – importation of foreign embassies, endorsement first by the Department of Foreign Affairs

35. Clearance Documentation Requirements • Importer’s Registration with BOC-ICARE • Customer Profile Registration (thru VASP) • Bank Reference Number / DT Account • Bank Reference Number / PEZA • Import Permit for Regulated Items

36. A Long List of ICARE Requirements • For Corporation, SEC Certificate of Registration, Articles of Incorporation and By-Laws and General Information Sheet as may be applicable • For Partnerships, SEC Certificate of Registration, Articles of Partnership and By-Laws • For Cooperatives, Certificate of Cooperation issued by the Cooperative Development Authority • Audited Financial Statements for the past year, if applicable • Bureau of Investments (BOI) Certificate of Registration, if applicable • Income Tax Return of the Company/Partners for the past three (3) years, if applicable • Etc……………………………… • Special Power of Attorney/Board Resolution of Authorized Representative • BCOR evidencing payment of registration fee • Printed CPRS Application profile • Mayor’s permit (CTC by Issuing Agency) • Barangay Clearance (CTC by Issuing Agency) • BIR TIN Card and/or VAT (or Non-Vat) Certificate of Application • Valid Government Issued ID with photo (e.g. Passport, Driver’s License, etc.) and Community Tax Certificate of the Application • Proof of Registration with the Department of  Trade and Industry (DTI) (Sole Proprietor)

37. The Philippine National Single Window (NSW) is a computerized internet-based system that allows parties involved in trade to lodge information and documents with a single entry point to fulfill all import, export, and transit-related regulatory requirements.  There are about 40 government agencies involved in the issuance of import and export licenses, permits and clearances for  trade  facilitation over Philippine borders.     

38. POST ENTRY AUDIT Are you ready for it?

39. Customs Post Entry Audit Section 3515, TCCP, as amended by Republic Act 9135 - requires importers and customs brokers to allow entry of authorized customs officers to their premises or the place where the records are kept anytime during office hours and conduct audit examination or inspection of records or documents that are relevant in the determination of the transaction value of imported goods and on the propriety of the dutiable amount declared by the importer/broker on the import-entry declaration.

40. Customs Post Entry Audit Executive Order 160 – creation of the Post Entry Audit Group (PEAG) To give teeth to this supervisory and investigative power of the BOC This office directly reports to the commissioner of customs. Under Customs Administrative Order 4-2004, no audit shall start without the issuance of an Audit Notification Letter (ANL) by the Customs Commissioner.

41. Customs Post Entry Audit ANL is somewhat similar to the letter of authority (LOA) issued by the Bureau of Internal Revenue in the sense that it authorizes customs officials to conduct an audit—a post-entry audit—on importations to determine the correctness of the taxes and duties paid on such importations. Importers/brokers are required to maintain and keep all records of their importations and/or books of accounts for a period of three years from the date of importation.

42. Post Audit Penalties Negligence - a fine equivalent to not less than one-half but not more than twice the revenue loss; Gross Negligence - a fine of not less than two-and-a-half times but not more than four times the revenue loss; Acts constituting Fraud - fine of not less than five times but not more than eight times the revenue loss.

43. Post Audit Penalties • Failure to keep records • a fine equivalent to 20-percent ad valorem on the imported article/s for which no records were kept and maintained • Withhold delivery of future importation to cover the fine and other assessment • Criminal prosecution punishable with a fine of not less than PhP 100K but not more than PhP 500k; and/or imprisonment of 2 years to 6 years

44. Why use a courier or forwarding service?

45. Why use a courier service? • Courier services, more often than not, are: • Faster • More secure • Allow tracking, are customized for specific requirements

46. When to use a customs broker? • Customs compliance advantages • Keeping legal customs records • Saving money on tariff duties • Saving customs broker fees

47. Basic Computation of Duties and Taxes TOTAL DUTIES, TAXES AND CHARGES DUE GOVERNMENT Dutiable Value (Customs Value) x Foreign Exchange Rate x Rate of Duty Total Landed Cost x 12 % VAT Rate IPF Table (CAO 2-2001) DV Amount IPF/Entry Up to PhP 250K PhP 250.00 >250k but <500k PhP 500.00 >500k but <750k PhP 750.00 >750k PhP 1000.00 + Cost of Goods + Freight + Insurance + Other Charges and Costs Exchange Rate (published weekly) Rate of Duty (per AHTN, Sec. 104 of TCCP) + Dutiable Value + Bank Charge (.125% of DV) + Customs Duty + Brokerage Fee + Arrastre + Wharfage + Customs Doc. Stamp* + Import Processing Fee** *Fixed at PhP 265.00 ** Per CAO 2-2001

48. Cost to Import • Cost of Goods • Freight • Insurance Premium • Bank charges • Duties, taxes and other government charges • Port or airport charges • Customs clearance expense • Brokerage Fee • Others